Alstom, Siemens to merge rail businesses to counter CRRC

MUNICH/PARIS — German industrial group Siemens AG and French rival Alstom SA agreed to merge their rail operations, creating a European champion to better withstand the international advance of China’s state-owned CRRC Corp. Ltd.

Siemens will own 50% plus a few shares of the joint venture, to be called Siemens Alstom, while Alstom will supply Henri Poupart-Lafarge as chief executive, helping to counter criticism that France is giving up control of another national industrial icon.

The non-executive chairman will come from Siemens.

The framework deal, which still has to be approved by Alstom shareholders as well as regulators, is a Franco- German industrial breakthrough for French President Emmanuel Macron but is a move that has riled opposition politicians.

Their worries center on France losing control of its TGV highspeed train — a symbol of national pride that has highlighted French engineering skill — and possible job losses.

Finance Minister Bruno Le Maire said on Tuesday that the French government welcomed the planned tie-up, which he said would protect French jobs.

The French state said it would not exercise an option to buy a 20% stake in Alstom from industrial group Bouygues SA.

The Siemens and Alstom transport businesses span the iconic French TGV and German ICE high- speed trains as well as signaling and rail technology. They have combined sales of €15.3 billion ($18 billion) and earnings before interest and tax of €1.2 billion.

“This Franco- German merger of equals sends a strong signal in many ways. We put the European idea to work and together with our friends at Alstom, we are creating a new European champion in the rail industry for the long term,” said Siemens CEO Joe Kaeser.

Alstom’s Poupart- Lafarge said: “Today is a key moment in Alstom’s history, confirming its position as the platform for the rail sector consolidation.”

Analysts at Deutsche Bank kept a “hold” rating on Alstom shares, saying extracting cost savings from the deal could be tricky.

“Politicians will also likely try to ensure some form of jobs protection in France (28% of Alstom’s work force) and Germany (39% of Siemens’work force), making cost synergies difficult to extract,” they wrote in a note. —